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Enbridge plans $15B in new pipeline projects

Enbridge Inc. has $15 billion in new projects under consideration as the company looks at expanding its network of pipelines to carry Alberta crude to the most lucrative export markets, the company&#39;s chief executive said today.

Wed., May 7, 2008

CALGARY – Enbridge Inc. has $15 billion in new projects under consideration as the company looks at expanding its network of pipelines to carry Alberta crude to the most lucrative export markets, the company's chief executive said today.

"Transportation of Western Canadian crude oil to the U.S. Gulf Coast is really a hot topic these days. This concept is a key plank in our market access strategy and has been for some time," Enbridge (TSX: ENB) CEO Patrick Daniel told the company's annual shareholder meeting.

"It really is intended to develop a pipeline infrastructure which improves crude oil pricing for all of our customers."

During the fourth quarter last year, Alberta-produced Western Canadian Select crude got about $11 less per barrel than the similar Mexican Mayan crude, which is priced on the Gulf Coast, the refinery centre of the United States, Daniel said.

"With that differential, the value lost to producers by not having access to the Gulf Coast ... would be approximately $1.5 billion – so significant value potential," Daniel said.

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Fellow Canadian pipeline heavyweight TransCanada Corp. (TSX: TRP), the country's largest natural gas shipper, has also signalled an eagerness to ship Canadian crude to the refining hub of Port Arthur, Tex., with a massive extension of its Keystone pipeline.

The best way to get Alberta oil down to the Gulf is via the $2.6 billion Texas Access pipeline Enbridge plans to build with Exxon Mobil Corp. (NYSE: XOM), the world's largest publicly traded oil company, shareholders were told.

That pipeline, which could have a capacity of 400,000 barrels by 2012, would connect from Enbridge's mainline at Patoka, Ill., and stretch all the way down to the Houston area. It would be much more economic than a whole new pipeline, which could cost more than three times as much, Daniel said.

Enbridge, Canada's largest oil shipper and owner of the country's largest natural gas utility, the former Consumers Gas in Ontario, said late last year that it would extend open season in order to find a shipper for Texas Access. Daniel told a news conference after the annual meeting that a phased approach to adding capacity to that pipeline may move the project forward more effectively.

"We would have loved to have had overwhelming support and to move right into it immediately. On the other hand, with all of the projects that we've got on the go, a little bit of a delay certainly isn't going to hurt us. We've got so much underway," Daniel said.

"What we want to do is get the timing right for our customers in terms of providing that service. And that's why when we didn't get overwhelming support for big volume in the open season we went to this alternative looking at smaller volume way of getting there to start up."

The ability to get Alberta crude to markets in Asia and California will also play a role in Enbridge's strategy in the years ahead, he said.

Enbridge plans to file an application to build its Gateway pipeline to Kitimat, B.C., on Canada's Pacific coast by. 2009. The oil could then be shipped by tanker to California and East Asia, Daniel said.

"This project is also very critical to maximizing the pricing of Canadian crude oil in the period post 2014, when once again we think we would have flooded the traditional markets for Canadian crude," he said.

Enbridge is currently in talks with several major Canadian oil producers, but would not disclose which ones.

Last month, the chief executive of Suncor Energy Inc. (TSX: SU) said that getting his company's oilsands crude into energy-hungry markets like East Asia and California will be a major priority for the Calgary company in the years ahead.

Daniel said would not confirm whether Enbridge was in talks with Suncor.

The increase "reflected a higher contribution from Enbridge Gas Distribution as weather in its franchise area was significantly colder than normal, as well as improved results in Aux Sable and Energy Services," Enbridge said today.

The bottom line was cut by a $32.2-million income tax charge after Enbridge lost a court case related to previously owned U.S. pipeline assets.

The $253 million in January-March net income was worth 70 cents per share and compared with a year-earlier profit of $228.7 million, 64 cents per share, on revenue of $3.36 billion.

Enbridge said its adjusted operating profit per share rose to 67 cents from 65 cents, beating the Thomson Financial analyst forecast by a penny.

"Favourable results for the first quarter of 2008 demonstrate the inherent strength and reliability of our existing core businesses and leave us well positioned to achieve our previously announced full-year adjusted operating earnings target of $1.80 to $1.90 per common share," Daniel stated.

Enbridge shares closed up nearly three per cent to $43.05 on the Toronto Stock Exchange today.

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